The Hindu Business Line : Are LPG variant cars losing cost advantage?

New Delhi, Sept. 16 Car makers’ efforts to boost the sale of liquefied petroleum gas (LPG) variants may just become more challenging, with the LPG price rising nearly in the same proportion as that of petrol. Auto companies contend that with both fuels offering almost the same mileage, the increase in LPG prices in the last few months vis-a-vis petrol is narrowing down the cost advantage for customers.

From May to August, LPG prices have risen from Rs 33 to Rs 37 a kg, while petrol has turned costlier by Rs 5 to Rs 50 a litre (Delhi).

“Last year at this time, LPG prices were around Rs 28 a kg. The jump in prices has made the fuel unviable. While compressed natural gas (CNG) at the current price is a viable option, its availability only in select areas makes it difficult to propel the sales of the variant in large volumes, ” Mr Nitin Seth, Head-Car Product Group, Passenger Car Business Unit, Tata Motors, told Business Line.

Currently, LPG variants are available on M-800, Omni, WagonR-Duo, Accent and Indica. CNG models include Swift, Wagon-R Versa, Accent, Ford Ikon and Indigo.

Component makers such as Minda Industries who supply LPG kits also find a lukewarm response. “We expected to sell 5,000 LPG fitment cars monthly, but are falling short of target with just 2,000-3,000 leaving the shelves,” said Mr N K Minda, Chairman and Managing Director, Minda Group.

A similar concern was expressed by a top official of a leading car company. “Assuming that in future the quantum of petrol price increases will be much higher than LPG’s, we hope that customers will opt for such variants,” he said.

Better option

With CNG prices still competitive, car makers weigh it as a better option. While the initial cost of converting the car to CNG is Rs 35,000-48,0000 as compared to Rs 15,000- 25,000 for LPG, its running cost is much lower. This is due to the low prices of CNG at Rs 19 per kg, translating into Rs 1.50 paise a km as against Rs 2.50 –Rs 3 a km for LPG and Rs 4 for petrol.